On 1 March, 19_6, a company placed 30 000 units in production. All items produced were sold at £7.40 per item immediately on completion.

Manufacture was performed in three successive processes, the costs of which were as shown at top of next page.

Works overheads of £26 400 were allocated to production in the ratio of machine hours worked.
The process accounts were credited with normal scrap arisings, which were £370 for Process 1 and £204 for Process 2.
Separate accounts were kept for abnormal scrap and for rejects, details of which were:

Process 1: 900 items scrapped and sold for £800 cash.
Process 2: 2 100 items scrapped and sold for £2 500 cash.
Process 3: 1 000 items rejected and sold for cash at 60 per cent of normal prices.

Prepare:

(a) the process accounts for each process; (18 marks)

(b) the accounts to show: (1) abnormal loss and, (2) rejects after the completion of the production and the transactions involving scrap and rejects.

Transcribed Image Text:

Materials Direct Machine Used Wages Hours Process 1 11 395 20 550 59 Process 2 Process 3 9 750 8 100 176 1950 13 035 117